Are you ready to move your family into a new home, but you’d like to take your existing home and turn it into a rental? Rental property is a great way to make passive income, but it does take careful planning in order to convert your home into a rental unit. Here are some things you need to consider if you are planning to turn your home into a rental property.
Can You Be a Landlord?
One of the important things to know is whether or not you have the ability to be a landlord. If you have not dealt with this before, it pays to hire a property management company. Tenant issues are extremely challenging to deal with. Form tenant turnover to late rent payments, dealing with tenants is not an easy thing. If you do not have the patience, training and experience to deal with these challenges, you may want to consider a different option.
Mortgage Options
In most situations, the mortgage on a primary residence will have a lower interest rate than a rental property. If you want to convert your property into a rental, you can keep this benefit as the mortgage loan usually asks that you maintain living in that property for at least two years. Converting to a new loan that allows for renters can increase your interest rate, so you will need to look at all of your options. Some people find refinancing their loan is a great way to obtain some of the equity to put towards upgrades and repairs and to let the bank know you are planning to rent out the home. One of the biggest issues DIY landlords face is not knowing the terms of their mortgage loan, only to find out they are in breach of contract because they are allowing renters when they are supposed to maintain this as their primary residence.
Insurance Requirements
Rental homes need to have insurance coverage. You will need to contact your insurance company to find out what options are available for rental homes. Renters do come with their own set of risks, so it is important to look around to find the best rates you can. Landlord insurance is more expensive than standard home insurance, so you do need to keep this in mind if you are planning to convert your home into a rental property.
Cash Flow Concerns
As a landlord, you will end up relying on keeping tenants in the property or you can face losing money on your investment. Within about two months of a tenant moving out, landlords can start losing money on the property as they do not have a new tenant to help pay for the mortgage and costs associated with the property.
Don’t let these pitfalls happen to you! Hire Keyrenter Property Management San Antonio, TX to help you with the real estate investing and property management needs.
